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The Business Case Against An MBA

By June 22, 2012 One Comment
By Ben Sands – For additional insights, tools, and leadership resources, click here

Assuming that you have answered the three key questions about grad school in a clear and compelling way, the next question to consider as you debate whether to attend grad school or not is this: is grad school the best strategy for getting from where I am today, to where I want to go?

More specifically, what I am really getting for the $100,000+ degree I am purchasing?

For the purpose of this column, I am going to focus specifically on business school – one of the most sought after – and expensive – advanced degrees in the world.

IS BUSINESS SCHOOL SMART STRATEGY?

Well, it all depends on what you’re going to do with the degree.

According to Bill Murphy, author of The Intelligent Entrepreneur, over 80% of the incoming class of Harvard Business School (HBS) cite a desire to “start their own business” as reason for pursuing their MBA.

Imagine, for a moment, that you are one of these incoming HBS students…  You have spent your first few years out of school working for world class companies and organizations – Goldman Sachs, Google, Teach for America, Kraft, KPMG….but you’ve always wanted to start your own company and your ready to take the next step in pursuit of that dream.  You have two options:

Option A: Pay Harvard $87,200 per year to teach you how to start your own company – marketing, accounting, strategy, etc.  You will meet a lot of other people that want start companies and learn, via classroom and case studies, all there is to know about business. You will study under guys like Clayton Christensen and Michael Porter and Bill George – business bad-asses… You will have weekends and summers off (!) At the end of the two years, you will start the new company…and start paying down your debt.

Option B: Take that same $175,000 ($87,000 x 2) and start your own company – or multiple companies – over a 2-year period. You will work extremely hard – no free weekends or summers – and make countless mistakes and mis-steps.  Every once in a while, that hard work will be accented by a victory – small or large.  You will seek out a “tribe” of other committed entrepreneurs – individuals who are working diligently to solve the same problems you are trying to solve (“how do I reconcile accounts in QuickBooks!”) and together you will learn what you need to know. At the end of two years you will continue to run that business, start another one, or decide that entrepreneurship isn’t for you – and head off in a new direction.  As above, depending on how deep you’ve gone into the $175,000 that you started with, you’ll be responsible for paying it back.

What option would you choose? Would you go to Harvard to learn to start a company – or would you just start one and learn on job?

Here’s a quick best case/worst case analysis:

Option A: Pursuing a formal MBA

Best case scenario: You study under the best teachers, and with the best students – you learn a ton.  You incubate your ideas; select one; and find a partner with whom to start it.  The B-school network provides you access to seed capital and away you go.  Your business is successful; you are able to pay off your school loans quickly; you are living the dream.

Worst case scenario: You learn very little – either because you’ve never excelled in formal studies or because you’ve decided instead to focus on “building your network” one happy hour at a time. You graduate from school with no job and, worse, no better idea what you want to do with your life. And, oh yeah, $100,000+ debt.

Most likely scenario: You learn a lot and meet great people, but never really have that moment of clarity – that ah hah! moment when you realize your calling in life.  You discover new interests – but nothing that is so compelling that you are willing to fully commit.  Lacking a clear idea of the business you want to start, you decide to take the offer from your former employer, McKinsey…essentially one step up from the one you left before going to business school.

Option B: Start your own company (i.e. your “practical post-graduate education”)

Best case scenario: Your first idea is a huge success. You prove the concept early enough to secure funding or revenue before your dinner money runs out.  You stumble through the development of an organizational and operating model but you ultimately find one that works. Your first $100,000 of profit goes to you – not the bank – and you meet a beautiful guy or girl who loves your adventurous spirit, creative mind and can-do attitude.  You join the Board of Regret Free Life to help other people achieve their dreams and live happily ever-after…

Worst case scenario: Your first business fails, as does your second. You’re $100,000+ in debt, with no business….but you have packed a virtual 10 years of formal business education into 2 years. You are ready to start a new venture – or have decided, contentedly, that entrepreneurship is not for you and you go get a job at Bain, BCG or McKinsey.

Most likely scenario: Your first business fails, but the second is a mild success.  You are slowly, but surely, figuring out how to handle the stuff that can’t be taught in classrooms – e.g. how to interview successfully; how to manage high-performers; how to negotiate with suppliers, etc.  You know more than any MBA could teach you; but your still not making huge money.  The good news: you still have very little debt – and the path to prosperity is clear, if not certain.

Is business school a smart strategy for you? 

Ultimately it depends on what you want…  If you aspire to the F-500 C-suite, then business school will be a necessary hurdle to cross.  If entrepreneurship is your calling, skipping business school would likely make more sense.

But what if you don’t know what you want? This, ironically, is the main reason that most people attend business school in the first place…

Business, and graduate schools in general, offer a way for very smart, hard-working people to take a socially-acceptable “break” from the soul-crushing banking, consulting or investment jobs from which most come.  As one of my former consulting clients – a Fortune 400 CEO lamented: “My time at business school was the first time in my life that I had the ‘space’ I needed to ask myself what I was doing there in the first place!”

If that sounds like you, here’s the smart strategy: Create some space for yourself now – before you feel the need to pay for it.   

There’s no right or wrong answer – only choices, with implications. For better or worse, the high cost of most graduate programs mean that the implications are significant. The real worst case scenario – the one we must avoid – is to pay handsomely for a degree that you don’t end up wanting, needing or using…but being hamstrung by the debt burden for the rest of your life.

Next Tuesday, in my final post on this topic, I’ll offer some suggestions on how to use that “space,” wisely. The key strategic question we all must answer – not just with respect to graduate school, but any major life decision, is this:

Am I moving closer to, or further away, from freedom?

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Ben Sands

Author Ben Sands

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